Shock Wave In The Crypto World! The Big Danger Awaiting USDT

There is an important development for the USDT stablecoin, which is an important player in the cryptocurrency market. Accordingly, there is a situation revealed by a new research conducted by Kaiko. Accordingly, it experienced a slight deviation from its peg, or price constant, throughout August.

USDT Peg and its challenges in the cryptocurrency world

Stablecoins are cryptocurrencies pegged to specific assets, such as the US dollar or British pound. In other words, they are designed to maintain a fixed value. However, during periods of extreme market volatility, these stablecoins gain in value relative to the assets they represent. Or they may lose value and lose their constants. Historically, USDT’s deviation from its peg to the US dollar has been linked to many factors, including Tether’s redemption fee, liquidity restrictions, and minimum redeemable quantity requirements.

Kaiko analyst Riyad Carey introduced a new metric called “depeg severity” that relates a stablecoin’s total trading volume to its vulnerability to peg deviations. As transaction volume increases in the crypto world, the depeg threshold decreases. On the other hand, the value lost due to peg deviations increases. Other stablecoins such as TUSD, BUSD, DAI and USDC have experienced minor cases of depreciation throughout the year. However, the report notes that they are less sensitive to deviations from the US dollar. It also suggests that they exhibit greater stability.

USDT’s permanent discount raises concerns

The report states that the most serious depegging incident for USDT this year occurred on August 7. Accordingly, he emphasizes that USDT is traded at a 2% discount compared to its $1 constant on many trading platforms. This loss of value follows reports of net USDT sales of approximately $500 million on major crypto exchanges such as Binance, Huobi, and Uniswap.

Carey observes that “the cryptocurrency USDT has a peg stability problem.” The combination of redemption fees and minimum requirements drives USDT holders to sell the token on the market rather than redeeming it for USD with Tether. As liquidity decreases, the market struggles to absorb significant USDT sales. USDT depreciation events have not caused significant fluctuations in prices. But consistent discounting raises concerns. On the other hand, it has the potential to shake trust if it continues.

Recommended solutions

In response to these findings, Carey suggests Tether consider eliminating the redemption fee and minimum requirements. Additionally, according to Carey, there is a consequence to removing the fee, given Tether’s significant gains. At this point it will likely have a limited impact on profits. However, this move can positively affect the USDT supply.

Currently, Tether imposes a 0.1% fee on fiat withdrawals over $1,000. It also allows the use of cryptocurrency USDT at $0.99. Accordingly, the minimum fiat money withdrawal or deposit amount is 100,000 dollars. Additionally, when we look at cryptokoin.com, users have to pay a non-refundable $150 for account verification.